Protect & Thrive – Asset Protection & Holding Companies

In these uncertain times, surplus cash not required for working capital and other prized assets held by a company are potentially being left at risk. Therefore, a company may wish to implement an asset protection strategy to help limit liability risks arising from the coronavirus crisis. Holding Companies & Shielding Company Assets A holding company (“HoldCo”) is a limited liability company that acts as the parent of a trading company (“TradeCo”). HoldCo does not carry out any trade activities itself and will instead own the shares in TradeCo along with any other assets that the owners would like to protect. The basic steps to implement the planning are as follows:

1. The shareholders of TradeCo incorporate a new company (HoldCo)
2. HoldCo will make an offer to acquire the whole of the share capital of TradeCo in exchange for new shares in HoldCo, structured such that the shareholding %s in TradeCo match those in NewCo.
3. Surplus cash and assets are transferred from TradeCo to HoldCo

What About Tax? In the absence of reliefs, liabilities to CGT and stamp duty may arise on the share-for-share exchange. However, provided that the arrangement is structured in the correct way, it should be tax neutral. Advance clearance should be sought from HM Revenue & Customs prior to carrying out the relevant planning to ensure that CGT relief will be available. Likewise, a claim for stamp duty relief must be made to the Stamp Office. VAT is also a consideration. Expert advice should be sought before implementing your asset protection plan. Require assistance with preparing a clearance application or relief claim? Or do you require advice in relation to a restructuring? Please get in touch with a member of our team.